Double Tax Treaty between Cyprus and India successfully completed

On 29.06.2016 the negotiation on the Double Taxation Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income between Cyprus and India has been effectively completed.

The two countries signed the revised DTT on 18.11.2016 which replaces the existing treaty which was concluded back in 1994.

The revised DTT became effective in India as from 1.04.2017.  As it has been agreed, following the entering into force of the amending Agreement, the Indian Authorities will proceed with retrospectively withdrawing the classification of Cyprus in the 'Notified Jurisdictional Area' as from 1.11.2013.

As per the revised DTT, the maximum withholding tax (WHT) rates on dividends, interest and royalties will be as follows:

Dividends: 10%

Interest: 10% unless the BO of the interest is the government, a political sub-division, a local authority of the other contracting state, certain Indian institutions defined in the Treaty or any other institution as may be agreed upon between the competent authorities of the contracting states in which case the WHT will be reduced to 0%.

Royalties: reduced from 15% (as it was provided in the old DTT) to 10%.

The new DTT provides for source-based taxation of capital gains arising from the alienation of a company’s shares.  Investments undertaken before 1.04.2017 will be grandfathered with the view that taxation of disposal of such shares at any future date remains with the contracting state of residence of the seller.

An updated exchange of information article is included in line with internationally accepted standards.

The revised DTT is expected to strengthen and attract more foreign investment in Cyprus.